What is Auditing and What to Expect in Auditing Theory? - Ep1

What is Auditing?

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.

(American Accounting Association)

Based on this definition, therefore, an audit has the following characteristics:
1. An audit is a systematic process, meaning, it follows a specific methodology or step by step procedures and these audit procedures are guided by standards, which in the Philippines, is called the Philippine Standards on Auditing or PSA and the Philippine Auditing Practice Statements or PAPS.
2. Auditing is an objective process, meaning, free from bias. Thus, an auditor should be independent from the organization being audited.
3. An audit involves obtaining and evaluating evidence. The gathered evidence will be the basis of the professional opinion regarding the fairness of the presentation of the financial statements.
4. The auditor evaluates the correspondence of the assertions, which are contained in the financial statements, by comparing them with criteria.
5. The results of the evaluation made by the auditor is communicated to the intended users via the auditor’s report.

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